Dairy futures and options exchange operator NZX had received inquiries from dairy farmers, big and small, asking for help in risk management.
As in past dairy commodity price downturns, those calls have increased.
Jaggard said a launch of a milk futures market was not imminent but NZX continued to work on the structure of such an offering.
It would go hand-in-hand with an active commodities futures market and because farmers had to sign up with a processor season by season, the milk price futures market would need to be cash settled, not based on milk delivery.
To be accessible to farmers the contracts would need to be for kilograms of milksolids in NZ dollars, not tonnes of milk powder in US dollars like the futures market.
“However, those who would be making a price in the milk futures market would be hedging themselves in the commodities futures market,” she said.
The industry had waited to see if Fonterra’s guaranteed minimum price scheme might be sufficient but it was now apparent the GMP scheme was too small.
“Farmers have told us they need something that would be more flexible and have the ability to cover more milksolids.”
Jaggard said international dairy prices had been volatile for years and were getting more so.
As government intervention and price support schemes were being closed the markets needed to bring forward ways of managing risk for their participants and mitigating volatility.
“It is very important to us that dairy farmers have something.
“We are responding to demand – people have said you are providing risk management to the commodities market, what can you do for dairy farmers?”
